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Likely ASE-and-Siliconware Merger Sparks Concerns Over Monopoly of Taiwanese Market

Feb 02, 2016 | By CENS

Market share surveys have sparked monopoly concerns over the likely merger of IC assemblers Advanced Semiconductor Engineering Inc. (ASE) and Siliconware Precision Industries Co., Ltd. (SPIL).

According to the survey released by the Industrial Economics & Knowledge Center (IEK) of the Taiwan government-backed Industrial Technology Research Institute (ITRI), in 2014 ASE commanded 37.5 percent of the Taiwan market and SPIL 20.6 percent, together controlling as much as 58.1 percent.

A survey by the American consultancy Gartner Inc. shows the two companies having commanded a combined 60.1 percent of the Taiwan market in 2014. Citing ASE's 2014 annual report, the market surveyor points out that the two companies generated combined revenue that accounted for at least 58.9 percent of the global industry.

Industry executives point out that institutional investors usually overlook the significant dominance by the two companies in the global market of contract IC testing and packaging service, in particular the segment for high-end logic IC testing and packaging service.

The two firms together supply over 80 percent of the market for high-end logic IC service to mainly adopt the Cu-pillar and flip-chip chip-scale packaging technologies required by makers of handset, computer and network-connectivity ICs. 

They say the likely merger to result in near monopoly of the market will enable SPIL to present a substantial case before the Cabinet-level Fair Trade Commission (FTC) to deny ASE's full acquisition offer, which SPIL sees as a malicious takeover.

Although PowerTech Technology Inc. (PTI) has become another provider of logic IC packaging and testing service after taking over the Singapore-based Nepes Pte. Ltd., it is still behind ASE and Siliconware technologically, another reality that the FTC will take into consideration when reviewing ASE's acquisition proposal.

ASE announced late last year the offer to buy out SPIL only three days after the Tsinghua Unigroup of mainland China publicized its acquisition of a 24.9 percent ownership and a 25 percent ownership each of SPIL and PTI.

Industry executives say that ASE will fail in its acquisition attempt if the FTC decides not to approve such offer between Feb. 16 and 30 days thereafter.

ASE disagrees with the said survey and says that it and SPIL together command for only 33.6 percent of the local market, with it holding 21.4 percent and SPIL controlling 12.2 percent.

The company's executives contend that both the United States and European Union define market share related to acquisition deals at global level instead of domestic level. For instance, NXP's acquisition of Freescale and Intel's taking over Altera were vetted based on global calculation. They say worldwide ASE and SPIL command only a 15.9 percent market share.

However, Taiwan's Fair Trade Act only considers the market share companies hold in Taiwan in merger deals as long as they are headquartered in Taiwan because it only aims to protect the interest of local industries and consumers.

However the current merger is complicated by ASE's owning manufacturing facilities not only in Taiwan but also in mainland China and six other countries, with some industry executives questioning whether the acquisition should also be approved in the mainland and those countries.

Industry executives point out that when examining acquisition deals, the FTC also looks at whether the companies set prices, not necessarily on their market shares. They say both ASE and SPIL have invested enormously in advanced-technology developments in order to fortify their supremacy in some sectors, in which they actually set prices regardless of supply-demand situations.


Taiwan's Pure IC Assemblers & Their Revenue and Market Share at Home (2013-2014)

       Year

Company
2013 Revenue
As a percentage of total (%)
2014 Revenue
As a percentage of total (%)
ASE (not including USI)
NT$141.3bn
39.0
NT$150.8bn
37.5
Siliconware
NT$69.4bn
19.2
NT$83.1bn
20.6
PowerTech (including Greatek)
NT$37.6bn
10.4
NT$40.0bn
9.9
ChipMOS
NT$19.4bn
5.4
NT$22.0bn
5.5
Chipbond
NT$15.8bn
4.4
NT$17.7bn
4.4
Kyec
NT$14.7bn
4.1
NT$16.3bn
4.0
Orient Semiconductor
NT$9.6bn
2.6
NT$13.8bn
3.4
FATC
NT$9.0bn
2.5
NT$10.7bn
2.7
Walton
NT$8.9bn
2.2
NT$10.0bn
2.5
THEIL
NT$7.9bn

NT$8.3bn
2.1
Source: IEK


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